All posts by Financial Independence Hub

Gift Giving on a Budget: How to spend more wisely this Holiday Season

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By Tyler Thielmann, Spring Financial

Special to Financial Independence Hub

A recent survey from Canadian fintech company Spring Financial, found that nearly three quarters (74%) of respondents plan on reducing holiday spending this year and shoppers, particularly Gen Z (66%) and millennials (64%), are finding the financial strain of buying gifts to be the most stressful part of the holidays.

The economy has been challenging this year so it’s no surprise that shoppers are feeling added stress this holiday season. Whether you’ve already started your shopping or you haven’t even started your list, below are some practical holiday shopping tips to help make your spending less stressful and more manageable.

1.) Spread the joy of pre-loved items

This one might be easier said than done but with half of shoppers opting for gift alternatives, there’s a good chance your friends and family may be relieved about the idea of traditional gifts with more financially feasible alternatives. For example, places like Facebook marketplace often have gently-used children’s toys that offer a more budget-friendly price tag for the little ones on your list, while a traditional baking or book exchange can be a great alternative to Secret Santa games for the adults in your life.

2.) Set a budget and stick to it

It can be so easy to overspend during the holidays. There is always someone to shop for and shops — whether online or in-store — are set up in a way that encourages impulse buying and overspending. To set yourself up for success, set a budget and shopping plan before starting shopping to ensure you’re sticking to a spending limit that works for you. Don’t forget to account for all the extra expenses that come with this time of year like food, host gifts, and transportation to and from any holiday parties you have coming up.

3.) Compare your debt options

Sometimes, taking on a bit of debt is necessary to keep the holiday magic alive. The good news is, there are lots of financial options available to shoppers. Comparing the interest rates on any buy-now-pay-later programs as well as credit cards, lines of credit and loan is a great way to determine which debt option will be the easiest to pay off post-holidays. Continue Reading…

Must-Read Finance Ebooks that teach Gen Z How to Plan for the Future

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Image by Pexels

By Jack Andrews

For Financial Independence Hub

A recent study by Experian highlighted a troubling financial knowledge gap among Americans, especially younger generations.

Out of 2,000 adults surveyed, three out of five admitted that they have made expensive financial mistakes due to insufficient knowledge of credit and personal finance. Gen Z, in particular, faces significant challenges: 71% of respondents from this age group acknowledged that poor financial literacy has led to financial setbacks. Of these, 29% reported losses of $5,000 or more. These statistics underscore the urgent need for accessible and effective financial education.

Despite the evident need, a disconnect persists between the demand for financial education and its availability. While 78% of adults believe personal finance courses should be mandatory in high schools, only 25 states currently require such classes. This lack of structured education leaves many young people unprepared for essential financial responsibilities.

Gen Z is eager to learn about personal finance

However, there is hope: Gen Z is eager to bridge this knowledge gap. According to the same study, 80% of Gen Zers express a strong desire to improve their financial understanding, demonstrating a willingness to take charge of their financial futures.

The good news is that there’s a wealth of information available right at their fingertips. For example, there’s recently been an influx of reputable personal finance gurus sharing their knowledge on social media platforms. Former Wall Street trader-turned-financial influencer Vivian Tu is one of them. Known as Your Rich BFF on Instagram and TikTok, Tu has amassed over six million followers across her socials where she shares financial advice in the hopes of helping people live better, fuller financial lives. In addition to being a full-time content creator, Tu hosts a podcast called Networth and Chill and has written a bestselling book on all things related to personal finance.

 

Tu is far from being the only finance guru with a book worth reading. On Everand, you can find a plethora of personal finance ebooks that can help build your knowledge and your net worth. You can think about subscribing to this digital library as an investment. For an affordable monthly fee, you can access ebooks written by experts like David M. Rubenstein’s How to Invest and Steven A. Silbiger’s Retire Early?. So, if you’re ready to take charge of your financial freedom, here’s a list of the best finance ebooks to help you plan for the future:

How to Invest by David M. Rubenstein

 

Investing is one of the most effective ways to achieve financial independence, with a Youth & Money poll revealing that 63% of young adults believe the stock market is a great avenue for building wealth. Yet, many Gen Zers are not actively investing, often citing high living expenses or a lack of knowledge as barriers. This is where David M. Rubenstein’s How to Invest proves invaluable.

Rubenstein’s ebook is a deep dive into the principles of successful investing. Drawing on insights from some of the world’s most accomplished investors, the ebook provides readers with actionable strategies for navigating the financial markets. Whether you’re a novice or a seasoned investor, How to Invest delivers timeless wisdom and practical advice that can transform the way you approach investing. With Rubenstein’s guidance, young investors can gain the confidence and knowledge needed to grow their wealth.

Retire Early? Make the SMART Choices: Take It Now or Later? by Steven A. Silbiger

While Gen Z is proactive about managing immediate financial responsibilities, such as paying bills and budgeting, long-term financial planning often takes a backseat. According to a Newsweek report, 53% of Gen Zers have not yet contributed to a 401(k) or retirement plan, and 49% lack life insurance. These statistics highlight the importance of early retirement planning—an area expertly addressed in Steven A. Silbiger’s Retire Early? Make the SMART Choices. Continue Reading…

Strategies for Building a Substantial 401(k) Balance

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Retirement planning may not be at the forefront of every twenty or thirty-something’s mind. However, starting early could mean the difference between a retirement spent in comfort or want. With social security’s uncertain future and the rising cost of living, the sooner you embark on saving for retirement, the better. Managing your retirement savings wisely will ensure a peaceful and fructiferous future. Learn the strategies now for building a substantial 401(k) balance [United States.]

Image by Adobe Stock/ juliasudnitskaya

By Dan Coconate

Special to Financial Independence Hub

Today, a robust 401(k) plan is more crucial than ever for securing your retirement. Understanding how to manage your contributions and investments effectively can set you on the path to Financial Independence. As the traditional employer-sponsored pension system becomes less common, individuals are increasingly responsible for their retirement savings.

By taking advantage of employer contributions, understanding investment options, and reviewing your plan, you can cultivate a retirement savings strategy that prepares you for the future and helps you build financial confidence. These strategies for building a substantial 401(k) balance will ensure it becomes a strong pillar of your retirement portfolio.

Choose the Right Investment Options

Most 401(k) plans offer various investment options, and selecting the right mix can directly impact your retirement savings. Investments fall primarily into stocks, bonds, and mutual funds or ETFs, all carrying different risk levels and potential returns. A balanced portfolio that reflects your risk tolerance, investment timeline, and financial goals can better weather market fluctuations. Review your options regularly and consider rebalancing your portfolio to adapt to any changes in the market or your personal situation.

Gradually increase Contributions

If you’re hesitant about contributing a significant portion of your salary to your 401(k) from the outset, consider implementing a gradual increase plan. Many employers allow you to set up automatic annual increases in your contribution percentage. Taking advantage of raises or bonuses to boost your contributions ensures that you consistently increase your savings without feeling the financial strain of a sudden change.

Regularly Review your Plan

Conducting annual reviews of your 401(k) to ensure it remains aligned with your financial objectives is vital. Life changes, such as starting a family or changing careers, can shift your needs and goals, requiring adjustments to your retirement strategy. Continue Reading…

Real Life Investment Strategies #5: Retirement Decumulation Strategies

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Steps to Retire the Way you Want: Set Your Retirement Goals, Put your Money in the Right Places, and Optimize your Withdrawals

Graphic by Steve Lowrie: Canvas Custom Creation

By Steve Lowrie, CFA

Special to Financial Independence Hub

Most of us feel young well into our 60s (or even later) and retirement seems like a faraway concern for the distant future. However, thinking about your retirement early allows you to comfortably enjoy your later years no matter what your priorities are – leaving a legacy for your loved ones, travelling, spending time on hobbies close to home or any combination. Putting together a retirement income plan early gives you the best path to safeguard your financial freedom post-retirement.

Retirement income planning doesn’t mean constant worrying and going without today. It just means taking stock of where you are financially, where you want to be in the future, and setting up a plan to get there. That retirement plan could include setting up the right investment strategies now to allow you the flexibility you’ll need in the future to generate cashflow from the right places and pay the least amount of tax. It also could mean contributing regularly and consistently now so you don’t have to make up for lost ground in the future.

Let’s get into what retirement investment vehicles and strategies you have, how to think about your retirement priorities and goals, and how you can plan a decumulation strategy for the retirement you want and deserve.

Your Retirement Vehicle Options

When thinking about retirement vehicle options, I like to visualize pots or buckets of money; each of those pots represent a savings vehicle from which you can withdraw retirement cash flow. Whether it’s pots or jars or briefcases filled with cash that you imagine, here are the labels you can put on them:

It’s crucial to consider all of the different retirement “pots” you currently have or need set up. For couples, it’s also important to remember these options apply to both spouses which can be extremely advantageous for your retirement withdrawal plan.

Your Retirement Priorities & Goals

Once you’ve explored your retirement savings vehicle options, you’ll want to determine your priorities and define your goals.

It’s a bit of a balancing act where you might need to make some decisions to prioritize your goals. Do you:

  • Maximize your retirement income and fun (lifestyle needs, travel, etc.) OR
  • Leave a financial legacy for your family and loved ones OR
  • Focus on charitable donations

To help you prioritize your goals, we’ve got some great blogs on this topic to get you thinking:

Remember, it doesn’t necessarily need to be one goal vs. the other. However, you may need to consider how you can achieve all your goals, perhaps by weighting their importance (my retirement fun: 60, legacy for the kids: 30, charity: 10). Or you could consider how to distribute your specific investment “pots”, for example, you may choose to spend all financial assets and leave the kids the real estate.

A few more tips to help with your retirement goal prioritization:

  • Keep your retirement goals realistic – you’ll want to ensure you have the ability to reach your goals with highest probability.
  • Balance your spending, savings, and withdrawals to align with goals.
  • Review the location of your savings in the necessary “pots” to ensure you can meet your goals optimally.
  • Focus on minimizing tax – determine the best strategy for your priorities today and tomorrow. You can pay tax now or later (estate timing) or your plan can be to smooth out your tax outlay over time. This is a key consideration when allocating your savings into your investment vehicles.
  • Timing – as the old adage goes, timing is everything and I don’t mean market timing. From an investment perspective, the best approach is systematic and consistent contributions and properly planned withdrawals.
  • Be flexible – the longer you have between now and retirement, the more that things can change, including your goals and financial circumstances.

Retirement Decumulation Strategies in Action

Let’s look at how people just like you can implement these retirement decumulation strategies to reach their retirement goals.

The Accumulators: Suzie and Trevor Hall (When We First Met Them)

Financial Accumulators Suzie and Trevor Hall
  • In their late 40s
  • Still deep in their accumulation years
  • Two teenage children
  • Own a home, which is almost fully paid off
  • Have been good about living within their means and diligently saving
  • Hope to retire within 15–20 years
  • Want to fully fund their children’s education
  • Plan to complete home renovations before they retire

During their accumulation years, Suzie and Trevor followed advice from their independent financial advisor:

  • Start with planning, not investing.
  • Establish a spending plan.
  • Invest systematically.
  • Do a lifeboat drill.
  • Remember that it’s priced in.
  • Established an appropriate emergency fund and lifestyle reserve. Continue Reading…

Your Free Playbook to Retirement Income Planning

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By Mark Seed, myownadvisor

Special to Financial Independence Hub

There’s a lot to think about when it comes to achieving your retirement goals.

I know. 🙂

I think about it a lot. I write about it a lot.

Better still, I’m planning for our retirement income needs just around the corner.

As we all know by now, personal finance is forever personal.

You need to develop a strategy and retirement income plan that works for you. Nobody else will do.

Read on to learn about the key steps I’m taking and what key steps might apply to you as well. I hope you enjoy this free playbook to retirement income planning.

No course fee required. 🙂

Your Free Playbook to Retirement Income Planning

“Drawing down one’s savings in retirement is something very few retirees do well, even with the help of professional advisors.” – Fred Vettese, Retirement Income for Life.

A general retirement preparation rule suggests that retirement income should be about 70%-80% of your annual earnings.

Well, rules are made to be broken.

In some cases, these expert rules of thumb won’t apply to you at all!

Forecasting your future financial needs can be complicated – a puzzle that needs to be deconstructed and put back together.

That said, I believe there are two-major steps involved in retirement income planning and then a third for good measure:

Step 1: What are your spending goals?

Step 2: What are your investment savings and income sources to meet those needs?

Beyond that, you’ll want to consider a third step in my opinion:

Step 3: What is the bare minimum lifestyle that you’re ready to live?

With those key questions/steps to answer, here are our answers to these key steps I’m working through as part of my retirement income planning this year, for next year in 2025.

Step 1: What are our spending goals?

Step 1 is always first.

Some Canadians can live off a little.

Some Canadians want to live off a lot.

Your income needs and wants in semi-retirement or full retirement or whatever you want to call the next phase of your life will forever be personal and up to you.

A past headline that got a lot of retirement planning attention was this BMO study and its findings.

“BMO’s 13th annual Retirement Study reveals Canadians are prioritizing retirement savings as both contributions and account holdings have increased from the previous year. The study found that Canadians believe they will need $1.7 million to retire, up 20 per cent from 2020 ($1.4 million). However, fewer than half (44 per cent) of Canadians are confident they will have enough money to retire as planned, a 10 per cent decrease from 2020.”

Do you need $1.7 million to retire?

You might.

It is my conclusion most won’t need that much.

Here are the questions we’ve answered on this subject, to figure out what we need and want related to our spending goals:

  • How much do we wish to spend, annually, on average in retirement and starting when?
  • Do we see us working part-time or not at all?
  • Do we wish to have any “go-go” spending years/higher spending years in early retirement years vs. later retirement years?
  • How might inflation or other factors impact our savings?
  • Do we have any capital expenses in retirement – like newer cars every 10 years?
  • Do we care to leave any estate? If so, how much?
  • Are we prepared to change our lifestyle if needed?

I’ll link to all our answers to these questions later in today’s post with some articles for reference. 🙂

Step 2: What are our retirement income sources to meet those needs?

Just like planning a trip, once you figure out where you want to go you’ll need to figure out how to get there: what components are part of your trip.

As a starter for our retirement income planning considerations, I looked at these components: Canada’s retirement income pillars and what income might be available from each pillar and when:

  • Pillar 1 is the Old Age Security (OAS) pension and its companion program, Guaranteed Income Supplement (GIS) – age 65. 
  • Pillar 2 is the Canada Pension Plan (CPP) – starting age 65 or ideally later. 
  • Pillar 3 includes your mix of tax-assisted vehicles such as Registered Retirement Savings Plans (RRSPs), Tax Free Savings Accounts (TFSAs) and other accounts – starting in our 50s. 
  • Pillar 4 includes other assets accumulated over your lifetime such as your primary residence, vacation property (if you are lucky to have one), or stocks held with your brokerage firm in a taxable account – starting in our 50s. 

In Step 2, we basically listed all our available income sources and the potential timing of those income sources along with other considerations you might wish to review as well:

  • Maximize your Registered Retirement Savings Plan (RRSP). If you have unused RRSP contribution room from previous years, take advantage of the ability to “catch up” your contributions.
  • Eliminate debt. I believe servicing debt eats into your available income when you’re retired – we won’t have this problem since we intend to enter semi-retirement remaining debt-free.
  • Consolidate your investments. Consolidating your assets under one financial roof should make it easier to manage and diversify your portfolio and it could reduce your overall investment costs too.
  • Make your portfolio as tax-efficient as possible. Are you paying more to the government than you have to? Different types of income are taxed in different ways. Too much interest income, which is fully taxable in a taxable accont should be avoided beyond an emergency fund while capital gains and Canadian dividends receive preferential tax treatment when held in a taxable account. You should also strongly consider maxing out your TFSA with equities as well = tax-free growth. 🙂
  • Company pension(s). We have been fortunate enough to have x1 defined contribution (DC) and x1 defined benefit (DB) pension plan in our household – so we use those account values and income estimates in our retirement income planning at certain ages. For us, the DC will come online at age 55. The DB is likely to come online at age 65.
  • Inheritance/family estate. Is that in your financial future at all? “Bonus money” if so?
  • Part-time or hobby work. We have also considered the option to work part-time here and there not only for hobby income for travel but also to keep your minds busy and remain socially active too.

You might want to consider creating a retirement income map that breaks down your income sources every 5-years or so. Here is mine:

Our Retirement Income Map - March 2024

I’ll highlight our three (3) key early retirement income sources later in the post as well.

Step 3: What is our bare mininum lifestyle – could we scale back?

Through basic budgeting, I know our base – what our day-to-day living costs are with some buffer built-in.

Using this information, I know what we need to earn at age 65 to enjoy retirement with.

Our retirement income plan has that covered with a few income sources listed above including government benefits such as CPP and OAS in our future at age 65.

My problem and opportunity is, I don’t want to wait that long until age 65. 🙂

Maybe the same applies to you.

Life is short. Time is precious. Work on your own terms is better than needing to work.

I’ve recently heard from one blogger that it’s quite easy to spend less in retirement – just assume you will. You will take off-peak vacations as an example. I think that’s flawed thinking. You don’t always want to spend less in retirement. There could be bucket-like trips or other purchases you’ve waited your entire life to take.

A good solution is to figure out your Coast FIRE number.

With Coast FIRE:

  1. While you expect your retirement assets to grow as you reach a final retirement date, the good news is,
  2. Based on the assets you have, you don’t really need to save any more money for retirement = you are financially coasting to your retirement date. This is because existing income (full-time, part-time, hobby income, occasional work) or whatever work that is covers your key expenses until you reach your final retirement date.

Another option is Barista FIRE.

I would advise just like looking at your spending goals related to what you want to spend, you should also look at your bare bones budget and determine what you must spend. That’s your floor. That’s your starting point. Coast FIRE or Barista FIRE could be add-on solutions.

I’ve linked to this fun Coast FIRE calculator here and I’ve also listed this calculator amongst other FREE stuff on my Helpful Sites page.

Your Free Playbook to Retirement Income Planning

Before my answers I promised above here are a few other factors to consider:

  1. Time – Do you have a lot of time to save for retirement? i.e., are you saving later in life?
  2. Diversification and risk and liquidity – As good as any one stock performs in my portfolio, some are up over 40% this year (!!) it’s probably never a good idea to put all your retirement eggs in the same basket. What goes up could go down…  I’ve always believed that any near-term spending within the next 1-2 years should likely be in safe cash or cash equivalents and not equities. Again, your mileage may vary.
  3. Inflation – To help ensure that your spending power is retained, you need to factor in the rising costs of goods and services. Ensure you include higher spending / inflation factors as you age. I’ll tell you mine below.

Our Playbook to Retirement Income Planning

Inspired by readers that wanted to know more, here are our answers to the questions above:

1. How much do we wish to spend, annually, on average in retirement?

Our desired spending for our first year of semi-retirement is in the range of $70,000 – $75,000 per year (that means after-tax).

As part of our retirement income assumptions we use the following that might be helpful to you as well:

  • 5% annualized rate of return i.e., over the coming decades from RRSPs/RRIFs, TFSAs and Non-Registered Accounts. Historically, we’ve earned much more than that but I like to be cautious.
  • 3% sustained inflation. I personally wouldn’t go any lower than 2.5%.

2. Do we see us working part-time or not at all?

Yes, part-time for sure.

I have personally anticipated I will continue working at something here and there after full-time work is done but the need to work however to meet our desired spending is now optional and therefore no longer required as of this year. Continue Reading…